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Gregory Roth II

Quality Insider

American Management


Published: Tuesday, August 12, 2008 - 13:23

In the 1990s the theme seemed to be, “Don’t compete against your competitors, buy them and compete with yourself.” It appeared that every company was merging with another. To their stockholders, companies pitched, “We’re going to buy company XYZ and increase economy of scale for both companies and make more profit.” “We’re going to consolidate accounting, human resources, production of all sorts, etc.” We all heard the rationale. Post studies have shown that most mergers weren’t cost-effective. Many good people joined the unemployment ranks. The damage to the purchased company employees can never be corrected. In many cases, good functioning systems were dumped in favor of the buying company’s system creating grief for the employees. Many of us worked under these conditions. Does this describe some period in your career? Did you really want to work there?

This decade has shown an unprecedented growth in globalization. The theme now is, “Whatever you want manufactured, you can get it somewhere cheaper than in the United States.” This has brought a completely new set of problems to solve. Language is just the first issue. Many companies found out the drawings they used for years didn’t convey what they needed when foreign companies reviewed it. The logistic of getting product from point A (somewhere else in the world) to point B (United States) is another. The next decade will look back with hindsight and evaluate globalization to see if it was truly cost-effective. The debate of the wisdom of shipping our manufacturing capability abroad is another subject but most of us are opposed to it. Political change in our country moves at the speed of turtles stampeding through peanut butter.

I once watched an automotive company in Michigan go all the way to India to get one part made. The company sent a group of people on three different occasions to India to get all the details worked out to purchase the part. An engineer within the company computed that it would take all the savings from purchasing this part for the next seven years to just to pay for the trips the people made to India to close the deal. One has to ask, is this in the best interest of the stockholders? Just to sprinkle a little salt in the wound, a supplier quality engineer in the company figured out how to get the same part manufactured in the United States and delivered to the plant a penny cheaper than going to India. Surprisingly, no one in the purchasing department would listen to him. Is this the result of an overzealous purchasing department or top management not giving clear direction (reduce part cost or reduce part cost with the bottom line in mind). Politics is everywhere.

A residential lawn-tractor manufacturer has high-end tractors that are considered one of the better brands in its price range. None of their design engineers knew what the safety margin was on any component or the overall tractor. Management didn’t require a calculation for safety margin for the tractor. There’s roughly a one in two chance that you own one. This made attempts to improve quality a challenge.

An aircraft component manufacturer performed a gauge R&R study on their shop floor and found the gauge R&R was 290 percent of part tolerance. The supplier’s gauge was better, only twice the part tolerance. There was a dispute with the supplier as to whether the parts were to print or not. I feel a lot better flying having corrected this.

We've all experienced examples like the ones above in our careers. They are clear examples that American management looks at cost of goods manufactured as just that. They don’t take into consideration the cost also includes built in waste of all kinds. What has happened “to make it right the first time”? What has happened to optimizing our processes and design products correctly? Is American management so preoccupied with getting the cheapest piece price that they have forgotten about basic quality principles?

The Japanese got a foothold in the United States by producing inexpensive cars. Next, they eliminated the waste (including customer complaints) in their processes. Some design changes, better customer appeal and, they are now dominant players in the automotive market and they aren’t going away. They have provided us a host of waste eliminating tools (that they originally got from us, remember Deming).

Have we lost sight of one of our most important assets—innovation? What would happen if American management stopped looking for the silver bullet to reduce cost—mergers, globalization, quality fads, re-engineering, etc. and just concentrated on “make it right the first time”? What would happen to the cost of goods manufactured if the goal was 99.9 percent good first time yield? Would you want to work in this factory?

What would it take you to transform the company where you work? Remember, the way to eat an elephant is one bite at a time. Think in terms of quality cost. A dollar spent in prevention can yield ten to twenty dollars savings in failure cost. Are you up to the challenge?


About The Author

Gregory Roth II’s picture

Gregory Roth II

Gregory Roth II is an executive, published author, lecturer, and educator of the quality disciplines and statistics, with 30 years' experience in consulting, management, and engineering positions. He holds a bachelor's of science degree in engineering and is an ASQ Fellow, an ASQ Certified Reliability Engineer, a Quality Engineer, a Quality Improvement Associate, and a Quality Auditor. Roth is an Association of Professionals in Business Management–Certified Business Manager and a Six Sigma Black Belt.